MRF Ltd, India's top tyre maker, reported a 43 percent jump in profit for the year ended Sept, but warned that soaring rubber prices could crimp margins and profit in quarters to come.
Chennai-based MRF said consolidated net profit for the full year rose to 3.58 billion rupees from 2.51 billion rupees as sales increased to 74.6 billion rupees from 56.7 billion.
"Rubber price increase is continuously a matter of concern. That is not showing any softening. I don't see any respite in rubber over the next few quarters," Koshy Varghese, executive vice-president, marketing, told Reuters.
Prices of natural rubber, which make up over 40 percent of the cost of a tyre, has surged 43.5 percent to 19,950 rupees per 100 kg so far this calendar year.
Earlier in November, the prices had hit a record high of 20,300 rupees.
"We hope the topline continues to grow at this rate but the concern is at the EBITDA and PBT (profit before tax)," Varghese said.
"Unless adequate measures are taken there will be a problem with the bottomline."
Top tyre companies in India have been grappling with soaring rubber prices and have said price increases taken so far in the year were not sufficient to protect margins.
Earlier this month, the country's No. 2 tyre maker Apollo Tyres had told Reuters it will have to raise prices by 15-20 percent to merely sustain current margins.
Varghese said the company had made "minor adjustments" to prices of some tyres a few days back and further price hikes would depend on the cost push.
To meet the growing demand from original equipment makers (OEMs), MRF expects to spend close to 10 billion rupees in the current fiscal partly to set up a new plant at Trichy in Tamil Nadu.
This plant -- MRF's seventh -- will start adding to volumes within the next two years and will make "the full range of tyres", he added.
MRF shares ended down 4.55 percent at 7,969.80 rupees in a weak Mumbai market.